THE projection by the Bank of Zambia (BoZ) on inflation continuing to rise until 2017 will affect people’s savings and the performance of the economy, says financial analyst Maambo Hamaundu.
He said in an interview that high inflation rate meant that the public spent more on food therefore consuming all their savings.
Mr Hamaundu said savings were likely to be very minimal until Zambia attained a single digit inflation rate in 2017.
“We all desire to have inflation in a single digit because we will have low food pieces and stability. Saving might be very minimal and therefore there will be no money available for investment in the country. The economy will not have sufficient capacity for improvement,” he said.
Mr Hamaundu explained that people would only be able to save part of their income when food prices were low because they could not consume all their savings.
“People can even save their income and translate that into investment and build on an economy. When more people save, there is more money available for investment,” he said.
Mr Hamaundu said high inflation rate meant that the Zambian economy might remain under stress resulting into pressure on the exchange rate.
“What this means for the economy is that ordinary people are affected by inflation because we consume and spend a bit more to produce goods and services.
“It also means that the economy might actually remain under a lot of stress because productivity will still be low hence putting pressure on the foreign exchange,” he said.
Last week, BoZ governor Denny Kalyalya announced that inflation rate was expected to remain high, particularly in the first half of 2016, but decline sharply from the third quarter and trend towards single digit levels by the end of 2017.
“Despite the elevated level of inflation in January 2015, recent data suggest that changes in monthly inflation will return to average levels after the second quarter of 2016,” he said.
Dr Kalyalya said inflation in the first quarter of 2016 was projected to average 21.6 percent, partly reflecting the persistent inflationary pressures from the fourth quarter of 2015 and high food prices.
“The risks to the inflation outlook are skewed upside, and include Electricity rationing, which will keep the cost of production at elevated levels,” he said.